SAN FRANCISCO (MarketWatch) — Among the companies whose shares are expected to see active trade in Thursday’s session are ExxonMobil Corp., MasterCard Inc., Motorola Inc. and Walt Disney Co.

Alcatel-Lucent (ALU 2.56, +0.01, +0.39%) is projected to post second-quarter loss of 11 cents a share, according to analysts surveyed by Thomson Reuters.

AmeriSourceBergen Corp. (ABC 20.28, +0.98, +5.08%) is forecast to post a fiscal third-quarter earnings of 39 cents a share.

Avon Products Inc. (AVP 29.74, -0.13, -0.44%) is expected to report second-quarter earnings of 34 cents a share.

Cablevision Systems Corp. (CVC 18.93, -0.29, -1.51%) is projected to post second-quarter earnings of 29 cents a share.

Cigna Corp.Ā (CI 26.89, +0.31, +1.17%) is forecast to post a second-quarter earnings of 96 cents a share.

Colgate-Palmolive Co. (CL 75.85, +0.48, +0.64%) is expected to report second-quarter earnings of $1.05 a share.

Expedia Inc. (EXPE 18.34, -0.50, -2.65%) is projected to post second-quarter earnings of 31 cents a share.

ExxonMobil Corp. (XOM 71.25, -0.18, -0.25%) is forecast to post a second-quarter earnings of $1.02 a share.

Genworth Financial Inc. (GNW 6.78, +0.12, +1.80%) is expected to report second-quarter earnings of 16 cents a share.

Goodyear Tire & Rubber Co. (GT 13.84, -0.05, -0.36%) is projected to post second-quarter loss of 70 cents a share.

Kellogg Co. (K 48.04, +0.22, +0.46%) is forecast to post a second-quarter earnings of 83 cents a share.

Level 3 Communications Inc. (LVLT 1.58, -0.04, -2.47%) is expected to report second-quarter loss of 9 cents a share.

MasterCard Inc. (MA 189.50, +0.95, +0.50%) is projected to post second-quarter earnings of $2.42 a share.

McAfee Inc. (MFE 44.24, -0.40, -0.90%) is forecast to post a second-quarter earnings of 57 cents a share.

MetLife Inc. (MET 33.10, +0.82, +2.54%) is expected to report second-quarter earnings of 68 cents a share.

Monster Worldwide Inc. (MWW 13.58, +0.07, +0.51%) is projected to post second-quarter earnings of 1 cent a share.

Motorola Inc. (MOT 6.57, -0.25, -3.67%) is forecast to post a second-quarter loss of 4 cents a share.

Mylan Laboratories Inc. (MYL 13.00, +0.09, +0.70%) is expected to report second-quarter earnings of 29 cents a share.

Newell Rubbermaid Inc. (NWL 12.26, -0.01, -0.08%) is expected to report second-quarter earnings of 35 cents a share.

NRG Energy Inc. (NRG 26.50, +0.02, +0.08%) is expected to report second-quarter earnings of 74 cents a share.

NYSE Euronext Inc. (NYX 27.02, -0.18, -0.66%) is expected to report second-quarter earnings of 45 cents a share.

OfficeMax Inc. (OMX 7.18, -0.23, -3.10%) is expected to report second-quarter loss of 7 cents a share.

Oshkosh Corp. (OSK 27.00, +0.14, +0.52%) is expected to post a fiscal third-quarter loss of 18 cents a share.

Pitney Bowes Inc. (PBI 23.49, -0.35, -1.47%) is expected to report second-quarter earnings of 60 cents a share.

RealNetworks Inc. (RNWK 3.02, -0.14, -4.43%) is expected to report second-quarter loss of 6 cents a share.

Revlon Inc. (REV 5.67, +0.01, +0.18%) is expected to report second-quarter loss of 8 cents a share.

Rockwell Collins Inc. (COL 40.26, +0.65, +1.64%) is expected to post a fiscal third-quarter earnings of 90 cents a share.

Rosetta Stone Inc. (RST 25.99, +0.25, +0.97%) is expected to report second-quarter earnings of 13 cents a share.

Tyco International Ltd. (TYC 28.50, -0.25, -0.87%) is expected to post a fiscal third-quarter earnings of 45 cents a share.

Walt Disney Co. (DIS 26.04, +0.15, +0.58%) is expected to post a fiscal third-quarter earnings of 51 cents a share.

YRC Worldwide Inc. (YRCW 1.69, +0.03, +1.81%) is expected to report a second-quarter loss of $1.71 a share.

After Wednesday’s bell, Visa Inc. (V 65.76, -1.02, -1.53%) said fiscal third-quarter net income came in at $729 million, or 97 cents per class A common share. That compares to net income of $422 million, or 51 cents per class A common share, a year earlier. Net operating revenue in the latest period was $1.6 billion, up 2% over the prior year. On an adjusted basis, which includes restructuring and purchase amortization, net income for the latest quarter was $744 million, or 98 cents per class A common share. Excluding the impact from the sale of the company’s equity interest in VisaNet do Brasil, adjusted quarterly net income was $507 million, or 67 cents per class A common share, Visa said. The company was expected to make 64 cents a share on net revenue of $1.64 billion, according to the average estimate of 25 analysts polled by Thomson Reuters.

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Insurance company Aflac (AFL 35.29, -0.16, -0.45%) reported second-quarter net income fell 35% to $314 million, or 67 cents a share, from a year ago. Aflac said its profit was hurt by investment losses mostly related to CIT Group, the troubled lender. The insurer said its operating earnings rose 15.3% to $562 million, or $1.20 a share. Analysts had forecast $1.14 a share. Aflac backed its 2009 earnings forecast, excluding foreign currency changes. The company said it was cautious about sales growth. Separately, Aflac said it will buy Continental American Insurance Co. for $100 million. Aflac shares closed at $35.45 ahead of the earnings report. The stock is down 23% this year.

Equity Residential Properties Trust (EQR 21.25, -0.62, -2.84%) reported net income dropped to $105.9 million, or 35 cents share, compared to net income of $139.9 million, or 46 cents a share, in last year’s quarter. Funds from operations were 58 cents a share, down from 64 cents.

Symantec Corp. (SYMC 15.90, -1.34, -7.77%) said its fiscal first-quarter net income fell sharply to $73 million, or 9 cents a share, from $172 million, or 20 cents a share in the same period a year earlier. Revenue for the period ended in early July fell to $1.43 billion from $1.65 billion, the security software maker said. Excluding special items, Symantec said earnings were 34 cents a share. Analysts on average had expected Symantec to post earnings excluding special items of 35 cents a share for the quarter, and $1.49 billion in revenue, according to data compiled by Thomson Reuters.

Oil refiner Tesoro Corp. (TSO 12.70, -0.37, -2.83%) , facing poor margins and weak industrial fuel demand, reported late Wednesday a second-quarter loss of $45 million, or 33 cents a share. The company posted net income of $4 million, or 3 cents a share, a year ago. Revenue for the three months ended June 30 fell 53% to $4.18 billion from $8.89 billion. Analysts polled by FactSet had predicted the San Antonio, Texas, company would report a loss of 28 cents a share on $4.16 billion in revenue. Tesoro shares fell 2 cents ahead of the report to close at $13.07. The share price is down 17% over the past 12 months.

These companies have detailed brochures which outline the risks associated with leveraged ETFs. If you glance at their website, or even search for these ETFs, you will find ample details about the high risks and the short-term nature of these ETFs. The websites of Proshares, Direxion and Rydex have listed the disclaimers on their website as well. They clearly state that they seek DAILY investment result of 200% or 300% investment of the price performance of the Index they follow (or it’s inverse in the short ETFs). I am still not sure about certain allegations regarding these ETF companies trying to mislead investors hold any truth. They are not forcing anyone to invest in their products. The bottom-line is that long-term and ‘buy-and-hold’ investors should stay away from these investments or be clear about the risks they carry. They should preferably be used by sophisticated investors and day traders.

It’s very important to understand the concept of “daily performance” for these ETFs. Let’s take an example of FAS. FAS is a triple leveraged (3x) product from Direxion. FAS seeks daily investment results of 300% of the price performance of the Russell 1000 Financial Services Index. Now YTD, the Russell 1000 Financial Services Index is up 2.1% thanks to the nice rally in Financials after the March 09 lows. This does not mean that FAS would be up 6.3%. In fact, FAS is down a staggeringĀ  63% YTD. Let’s look at an inverse ETF – SDS. SDS is a product from ProShares that seeks daily investment results that correspond to twice the inverse daily performance of the S&P 500 Index. If you see the 52-week performance of S&P 500, it’s down 20%. If that leads you to think that SDS should be up 40% (twice the inverse), you might be in for a bit of a shock. SDS is actually down 32%. That’s the reason for the stress on ‘Daily Performance’. If you look at the daily performance of these leveraged and inverse ETFs, they are fairly close to the indices they track and that’s their intention as well.

During the market crash last year, inverse ETFs like SKF (ProShares UltraShort Finance), SDS (ProShares UltraShort S&P 500), BGZ (Direxion 3X Bear Russell 1000), DXD (ProShares UltraShort Dow 30), FAZ (Direxion 3X Bear Russell 1000 Financial Services), SRS (ProShares UltraShort Real Estate) and others were very popular. At the same time their leveraged counterparts (UYG, SSO, BGU, DDM, FAS, URE) lost tremendous value because they were performing twice or thrice as worse as the indices. The markets picked up after the October lows into January 2009 only to drop to historic lows in early March. After the March 09 lows, market has had a steady rise for the most part. It’s extremely volatile market like this one that makes it impossible for the leveraged or inverse ETFs to perform over a longer period. Unless your timing of buying and selling these ETFs was immaculate, Ā if you held these ETFs for the last year or so, they have underperformed the respective indices by a substantial margin. In a more directional market (either bullish or bearish), the performance of these ETFs might be better or at least predictable. But when the market makes historic lows and follows with a 36% rise in a matter of few months, it’s impossible for these ETFs to perform consistently.

So why do leveraged ETFs fail to perform over a longer period of time? Leveraged ETFs are traded very actively since they seek the daily performance of the index they follow. Imagine trying to get twice or thrice the return of a particular index (or it’s inverse) on a daily basis! Leveraged and inverse ETFs use options, futures, swaps and other derivatives to gain the desired performance. The leveraged ETFs ‘reset’ every day and their goal is to make sure that for any given day they give the stated performance with respect to the particular index. Let’s look at an example of BGU which seeks thrice the performance of Russell 1000 index. Let’s say for month 1, Russell 1000 index was up 10% and for month 2, it drops 10%. At the end of these two months the Russell Index is down only 1% [(1.1) * (0.9)]. Now let’s examine BGU. For month 1, BGU would be up 30% and for the month 2, it would be down 30%. At the end of the two month period, BGU is down 9% [(1.3) * (0.7)]. Theoretically, it should have performed thrice as worse as the Russell 1000 index – down 3%. The most important thing to understand here is that compounding works both ways.

There is a good article on performance and calculation of leveraged ETFs here.

The bottom-line is that in this kind of a market, leveraged ETFs should be used by day-traders or experienced investors. If someone still feels compelled to invest, they should fully understand the purpose of these ETFs and risks associated with them. If you were lucky enough to make a good profit with these ETFs, it might be a good idea protect your profits rather then riding the wave on the down side – remember compounding works both ways.

Back in the 18th century, Baron Rothschild (a member of the bank dynasty) said, “The time to buy is when there’s blood in the streets.” On its face, the advice makes sense. But, when it comes to actually doing it, most investors freeze up.

However, in the case of Warren Buffett, he had the guts to make some big bets when the financial system was in free-fall. In October, his firm, Berkshire Hathaway (NYSE: BRK.A), shelled out $5 billion to buy 50,000 shares of cumulative perpetual preferred stock of Goldman Sachs (NYSE: GS). The shares came with a 10% annual dividend. Oh, and Goldman also granted a warrant to buy 43,478,260 shares of common stock at $115 a each.

That’s just this quarter and today’s earnings report. It’s become a habit for Apple to beat all estimates – recession or no recession. But I want to talk about Apple as an investment. In my humble opinion, Apple is one of the best growth stories – it has consistently proved that over the last several years and will continue to do so for many more to come. There are several reasons why I am bullish on Apple for the long run. As with any investment, you need to prudently manage the associated risks and protect your profits. I am definitely not recommending rushing and buying Apple at these levels. If anything, I would recommend booking your profits or at least protecting it. However, I am a fan of Dollar Cost Averaging and Apple is one company I would carefully DCA on.

1. Fundamentals: This is one company with rock-solid fundamentals.Ā  As of latest quarter reporting, Apple has $31.1B worth of cash which is huge. Apple’s cash reserves are growing at a very fast pace. Apple would be using this cash as needed towards the research and development of innovative products, enhancing existing products, possible acquisitions, partnerships and of course prudent marketing. Let’s take a closer look at Apple’s most recent balance sheet: http://www.apple.com/pr/library/2009/07/21results.html. Apple has total assets worth $48.1 B and total liabilities worth $22.2 B. The current assets are worth $35.2 B and total current liabilities are worth $16.7 B. Apple’s balance sheet speaks volumes about the stability and cash reserves of this company. As you might have guessed, Apple has one of the largest cash reserves among all companies. Cash is king right now and it further aids Apple to develop aggressive growth strategies and come out with top-notch products.

Apple’s P/E (Price to earnings ratio) is 28 which is excellent for a strong growth company. Even better, its PEG ratio is only 1.5 (PEG ratio accounts for growth ā€“ its price/earnings to growth). Appleā€™s gross margin is consistently growing. Apple dominates the smart-phone and music markets. Even though Macs occupy only 9% of the personal computing market share, Apple literally owns the $1000+ computer market. 91% of the high-end and high-priced computing market is dominated by Apple.

2. Management: Apple is inarguably one of the best managed companies in the world. It’s legendary CEO, Steve Jobs is often considered as one of the best Chief Executives. Ever since his return to Apple in 1996, this company has seen unprecedented success and phenomenal growth. Just to get some perspective, Apple’s stock price in 1996 before Jobs’ return was around $5.Ā  Apple did take a hit during the tech bubble along with all other tech companies. However, post the tech-bubble, Apple emerged as one of strongest technology companies and its stock value soared to new highs. In the last 10 years, Appleā€™s stock has essentially doubled every single year (1100% return in 10 years). Very few companies were able to stage a comeback from the tech-bubble era. Even big names like Microsoft, Intel, Cisco, Dell, Yahoo, HP and several others never saw their lofty highs again. After Steve Jobs’ comeback to Apple, the company consistently came out with new products and ensured a strong and growing market for itself. The iPod, iMac, Mac OS X, iPhone, Apple TV, MacBook Pro, MacBook Air and practically all other Apple products were released under the leadership and vision of Steve Jobs. Even today Apple continues to enter and dominate different consumer segments. First it was personal computing, then music and now mobile.

Sometimes Wall Street and people in general consider Apple as a one-man show. Several people believe that without Steve Jobs, Apple will never be the same again. No other CEO attracts so much attention from the Wall Street biggies or moves his companyā€™s share price with a few words. Even his health issues which should be strictly personal became a cause of Wall Street debate (or dare I say national debate) and caused the Apple share price to drop significantly. Agreed that Steve Jobs is a primary reason behind Apple’s continued success, however he has assembled a team of brilliant executives and engineers. I am sure no one knows Apple better than Steve Jobs. I am also positive that he has a clear idea about his health, when he wants to retire, who he wants to see as his successor and where he wants to see Apple in the next few years. There are smart Apple executives who are mentored by their CEO. So, Wall Street and investors should quit worrying about what would happen to Apple without Steve Jobs. Apple has never disappointed its investors and it never will. Also, its no secret that Steve Jobs takes a $1 salary. Sure, he gets millions in stock options but that’s just it – it shows his confidence in his own company and the performance of it’s stock. His salary is only as good as the performance of Apple’s stock.

It will be difficult to replace Steve Jobs when he does decide to retire ā€“ especially his vision. However Apple has some fantastic executives like Tim Cook, Scott Forstall, Phil Schiller, Bob Mansfield and others who probably have learned a great deal from Steve Jobsā€™ style of leading the company. The bottom-line is I would let Steve Jobs worry about how he wants to steer the company from this point onwards. There is no point in senseless speculation about his health and retirement.

3. Innovation: Innovation is a forte of Apple. The reason why Apple has a cult-like following (and may I say ever increasing following) is because Apple leaves no stone unturned when it comes to innovation. There is a reason why there is so much euphoria surrounding Apple product announcements. Pick any Apple product ā€“ one thing you will note is Apple puts in a lot of effort in design and quality. It makes sure it pioneers the development of cutting-edge technology. iPods, iMacs and iPhones ā€“ all these products redefined innovation. Everyone else followed. However, itā€™s not easy to beat the leader and itā€™s impossible to beat the pioneer who constantly innovates. We see many other companies come out with All-in-one products to mimic Appleā€™s iMac but none succeeded. iPod is a historical success and every other person you see uses an iPod. Car manufacturers and electronic equipment manufacturers make sure they provide iPod connectivity. Other companies which tried to ride on the success wave of Appleā€™s iPod were either too late in the game or a complete failure.

But itā€™s the superb idea behind the iPhone that truly amazes me. When the rumors and subsequently the confirmed news about Apple trying to develop a mobile product hit the news shelves, Apple was ridiculed. Most people were of the opinion that Apple is a computer and music company and should stick to that. Appleā€™s iPhone was released in June 2007 and the rest is history. Apple put a computer in your hands and did it with style. Of course now everyone wants to make the next iPhone killer. None so far have been a success. Apple is gradually targeting the corporates and there is a very high chance it will be successful at doing that. Itā€™s almost shocking that all the big players in the telecommunication and mobile industry never thought about a smart device like iPhone. Now everyone wants to ride the wave but it might be too late. Besides, people forget the fact that no matter how many competitors come out with a similar product, Apple will always stay a step ahead. Look at Appleā€™s history. It already did what everyone is trying to do now. Apple will now focus on further innovation and itā€™s no secret that Apple takes its Research and Development very seriously. As Steve Jobs once famously said, ā€˜Innovation distinguishes between a leader and a follower.ā€™

4. Products: Itā€™s important to again quote Steve Jobs here because that will give you an idea about the strategy of Apple and thought process of its CEO. ā€œA lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets. Apple’s market share is bigger than BMW’s or Mercedesā€™ or Porsche’s in the automotive market. What’s wrong with being BMW or Mercedes?ā€ Apple has never targeted volume. If Apple wanted to do that, it could easily have easily and made several cheaper models of Macs. Appleā€™s focus has always been quality, design and gross margin. You shouldnā€™t be surprised to note that Appleā€™s gross margin keeps on increasing consistently. Itā€™s like BMW sells fewer cars than Toyota or GM but its profit per sold car is a lot more. Even then, Appleā€™s market share in the field of personal computers is consistently increasing. As per NPDā€™s most recent data Appleā€™s market share in the higher-priced ($1000+) computer market is a staggering 91%.

Appleā€™s hardware is what has made it so popular. This includes the Macs, iPods, iPhones, Apple TV, server products and accessories. Apple refreshes its product very often (usually annually) and strives to come out with better products each time. There are rumors of an Apple Netbook during the holiday season although Appleā€™s COO denied the rumors. If Apple does come out with cheaper Netbooks, it will create a huge market for Apple in this area and probably make Netbooks a lot more popular than they are right now. There have been other rumors also floating around from quite some time including Appleā€™ foray into the video-game world. The iPhone started as a rumor too. With Apple, itā€™s difficult to predict what product it might bring out next. The point is that Apple continues to dominate every industry it enters – music, computing, mobile etc. which makes this arguably the best growth story of recent times. Apple will continue enhancing their existing products and coming up with new products.

Thatā€™s the hardware part but Apple is a leader in software as well and investors tend to overlook that part. Appleā€™s operating system is one of the most stable and user-friendly operating systems we have today. It perfectly complements its robust Mac hardware. Appleā€™s iTunes and App stores also generate substantial revenue for Apple. When people buy songs, movies, books, videos, podcasts etc. from iTunes and paid applications from the iPhone App store, Apple makes money. It has made a foray into cloud computing via MobileMe service. If you own Apple products, this is one service you would love to use.

It would take an unprecedented disaster from here on for Appleā€™s growth to slow down. Sure, the stock itself could fluctuate with the overall market but if you have a few years horizon, an Apple investment could reap rich rewards for you (strictly my personal opinion with a disclaimer that I have positions in Apple).

5. Sales: Apple has a very strong fan following. But the important point is that the loyal Apple following is increasing exponentially. With exciting new products like the iPhone, Apple has ensured that it pioneers in innovation. This in-turn has attracted people from all walks of life and all over the world. It’s evident from the long queues you see outside Apple stores during a new product launch. The hype that Apple events generate and the consistent buzz in the Media/Blogosphere about this company and it’s exciting products further fuels the exhilaration surrounding this company. This ever-increasing Apple user base is one reason why Apple earnings continue to baffle the pundits and the skeptics. Numbers like 5 million iPhones and 2.3 million Macs sold in the last quarter almost makes you feel that many people are saving money so that they can spend it on these products. People don’t want to wait for the economy to turn around to buy Apple products and that’s one reason why this company dodges recession.

The Mac sales are outpacing PC sales and this might keep continuing as more people turn to Mac. A very high percentage of existing Mac users upgrade their operating system when Apple comes out with a new OS. This will happen again when Snow Leopard is released in early Fall. The iPhone sales are going through the roof. Apple has made the iPhones available in several countries across the world and it’s increasing its user-base by leaps and bounds. The iPhone sales also get a huge boost from a very large percentage of existing users who want to own every new product refresh. The iPhone hasn’t penetrated the corporate world much but that might start happening gradually. Apple has made an excellent move by targeting the consumer first and it will surely aim the corporates next. The iTunes store and the App store is another huge revenue stream from Apple. You cannot ignore the positive impact of the App store on Apple’s profit when more than a billion Apps have been downloaded. Apple is also generating steady gains out of its other hardware products like Apple TV, xServe and software products like Final Cut Studio, iWork etc.

Some analysts got worried that the iPod sales have declined since last quarter. That’s because many people opt for the iPhone instead. That works out even better for Apple when you factor in gross margins and revenue sharing with telecom service providers around the world. Also, iPod sales should be a lot better this quarter and next with back-to-school season and holiday season.

The bottom-line is that I stay bullish on Apple as of writing this. With the recent run-up I am cautiously bullish but would still Dollar Cost Average on significant opportunities. The last quarter is not usually one of the most exciting quarters for Apple and even then Apple blew the earnings estimates. The next two quarters should be even more exciting since Apple would get a tremendous boost from the back-to-school and holiday seasons. There are also other exciting things lined up this year including new operating system, product refreshes and possible new products.

- Mauneel

SAN FRANCISCO (MarketWatch) — Apple Inc. on Tuesday reported a fiscal third-quarter profit that rose 15% from a year ago as the company sold 5.2 million iPhones and also recorded strong sales of its Macintosh computers and iPod media players.

Apple /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 158.40, +6.89, +4.55%) said it earned $1.23 billion, or $1.35 a share, on revenue of $8.34 billion. During the same period a year ago, Apple earned $1.07 billion or $1.19 a share on $7.46 billion in sales.

The results beat the estimates of analysts surveyed by Thomson Reuters, who forecast earnings of $1.17 a share on revenue of $8.16 billion.

Gross margins as a percent of revenue rose to 36.3% from 34.8% in the year-ago quarter.

Shares rose 3.7% to $157.08 in after-hours trading.

Apple said its results were led by sales of 2.6 million Mac computers — up 4% from last year’s third quarter — and 5.2 million iPhones. Sales of the company’s media players totaled 10.2 million units — down 7% from the same period last year. However, the quarter is typically the slowest one for Apple’s iPod business.

“The big surprises were the strong Mac units, as well as the gross margins,” said Shaw Wu, who covers Apple for Kaufman Bros. “I think the portable refresh helped out Mac sales.”

The upbeat results, which came ahead of Apple’s back-to-school selling quarter, suggest that while consumers may be reining in some of their spending, when it comes to Apple’s products, they aren’t holding back at all.

“They sold more iPhones, Macs and iPods than [most] estimates, so they don’t appear to be suffering from the recession as badly as other companies,” said Romeo Dator who manages U.S. Global Fund All-American Equity Fund. “We have back-to-school selling season in the September quarter, a probable iPod refresh in September, a possible netbook-like device and the holiday-selling season in December. These are all positives.”

Apple’s Chief Operating Officer, Peter Oppenheimer, said that for its fourth quarter, Apple expects to earn $1.18 to $1.23 a share on revenue in a range of $8.7 billion to $8.9 billion. The forecast topped the estimates of analysts surveyed by Thomson Reuters, who forecast Apple to earn $1.17 a share on $8.16 billion in sales. Oppenheimer said gross margins for the quarter should be about 34%.

It was also the first earnings report for Apple since Chief Executive Steve Jobs returned to the company after a medical leave of absence of almost six months. Jobs received a liver transplant during his time away from the company.

The iPhone highlighted the report, as Apple said sales of the smart phone surged 626% over the same period a year ago. The new iPhone 3GS was on sale for less than two weeks during the quarter.

Oppenheimer said response to the newest iPhone “has been tremendous,” with more than 1 million sold in the first three days of its release. The iPhone 3GS is currently available in just 18 countries, and Oppenheimer said Apple was dealing with a case of high demand and not enough products on the shelves.

“We are currently unable to make enough iPhone 3GSs to meet demand and we are working to address [that],” Oppenheimer added.

Rex Crum is a reporter for MarketWatch in San Francisco.

SAN FRANCISCO (MarketWatch) — CIT Group Inc. has reached a $3 billion rescue-financing agreement with key bondholders that will allow the business lender to avoid bankruptcy, according to a media report Sunday.

The deal was expected to be announced on Monday, The Wall Street Journal reported in its online edition late Sunday.

The news followed reports over the weekend that CIT had been trying to negotiate rescue financing with a group of bondholders to avoid bankruptcy.

The bondholder group was being advised by the investment bank Houlihan Lokey, and the talks were reportedly aimed at securing $2 billion to $3 billion of financing by Monday morning, Reuters reported, citing a source close to the situation.

The 101-year-old lender to small- and medium-sized businesses could file under the bankruptcy laws as soon as Monday if it can’t come to terms on a rescue, the source told Reuters.

At the same time, media reports say, should CIT Group file under the bankruptcy laws, it is trying to line up debtor-in-possession financing with a group of banks to fund its operations under bankruptcy-court supervision.

The banks might include J.P. Morgan Chase, Morgan Stanley, Goldman Sachs and Barclays, the reports say.

A report by Dow Jones Newswires, also citing unnamed sources, said the plan being considered would involve new funds for CIT, instead of a rollover of existing debt. The report said Morgan Stanley has been hired to advise CIT in the restructuring.

Evercore Partners Inc. also was hired as a bankruptcy adviser. The firm eventually could become the only adviser in case of a bankruptcy since JP Morgan and Morgan Stanley are existing creditors and would face a conflict of interest, Dow Jones Newswires said.

Bloomberg reported that a bankruptcy-law filing by CIT Group, /quotes/comstock/13*!cit/quotes/nls/cit (CIT 0.70, +0.29, +70.73%) with $76 billion in assets, would mark the largest bank collapse since regulators seized Washington Mutual Inc. in September.

CIT had filed to become a bank-holding company in December so it could draw on the U.S. Treasury Department’s Troubled Asset Relief Program. But last week, the Obama administration declined to give further help to CIT, leaving it to find a solution on its own.

Reuters reported that the administration’s move was a gamble that the financial markets and economy are now strong enough to sustain the collapse of a major lender.

One impact of a CIT bankruptcy filing would be enormous disruption for struggling retail-industry suppliers that rely on the lender for financing, the Associated Press reported.

CIT specializes in factoring, which involves providing short-term financing to manufacturers and other suppliers who can’t wait the usual 60 days to 90 days that they often must wait to get paid by retailers, AP reported.

A disruption in supply-chain financing could hurt the suppliers and also leave retailers without finished products to sell, AP reported.

Robert Daniel is MarketWatch’s Middle East bureau chief, based in Tel Aviv.

There are the usual stock splits (forward splits) and then there are reverse stock splits. There could be numerous reasons as to why a company would resort to stock splits. Forward splits are usually looked upon more favorably than reverse splits. In general, splits (forward or reverse) don’t affect the company bottom-line (market capitalization). In case of forward splits, the price of stock is reduced by a factor and the number of outstanding stocks is increased by the same factor. Reverse splits works exactly opposite – as we saw in the case of AIG mentioned above.

So, if the stock splits are irrelevant for company’s bottom-line and doesn’t really change anything, why do companies still split their stocks? First let’s look at forward splits since some investors love them. Forward splits depict a company’s confidence in their performance. Forward splits increases the number of outstanding shares and thereby the share’s liquidity. The bid/ask spread narrows with the lower share price. Can you imagine the bid/ask spread on BRK.A (Berkshire Hathaway) shares? The stock is trading at $90, 500 and it’s 52-week high is $147,000. The most important reason for a stock split is purely psychological. Some companies want to attract more investors and therefore split the stocks. If the share price gets too high, some investors (especially smaller investors) might turn away since they cannot afford it. A stock split reduces the price and it might bring in more investors. But this is purely psychological. I personally don’t agree with this because the actual effect is minuscule at the best.Ā  I always advise people to look at the total money they are investing and not the price of the stock. Berkshire Hathaway, Google and Apple are some companies that have expressed a strong desire to never split their stocks. Apple has done splits in the past but it’s not interested in further splitting their stocks.

One of my friends mentioned that he is interested in buying Apple stock but it’s too expensive at $150. He wished that Apple would split it’s stock by 3:1. I asked him to explain the rationale for that. His response was he wanted to invest $15,000 in Apple. At the current price he can buy only 100 stocks however, if Apple was trading at $50, he could buy 300 shares. That way he would own a lot more stocks and has a potential to make lot more money. It’s a wrong way of thinking but you will find many people who think along similar lines. I cannot stress enough that what matters is your total investment and not number of shares. If Apple appreciates 30% by the end of the year from this point onwards , your $15,000 would still increase to $19,500 whether you owned 100 stocks at $150 a piece or 300 stocks at $50 a piece. Now, something like BRK.A is a different story if you don’t want to spend 100K for just one stock!

Several companies have split their high-flying stocks several times in a bid to attract more investors and increase the liquidity of shares. Take a gander at the DOW or S&P components. You will find that most companies have split their stocks at one point or other. Pretty much everyone who wants their stocks to be trading at certain price levels have resorted to stock splits. In the recent past, Research In Motion (RIMM) – one of the most successful Technology/Telecommunication companies has done 3:1 and 2:1 splits.

So that’s all about forward splits. But why reverse splits? Why would companies increase their stock price and decrease the number of shares traded? Why would they decrease the liquidity and make it less attractive. History shows that reverse splits usually don’t bode well for companies. Sun Microsystems comes to mind when we talk about reverse splits and of course AIG is the most recent example. Companies might resort to reverse splits for a number of reasons. In general companies that are battered resort to reverse splits in a bid to make their stocks look more attractive. This hardly works if ever. Sun Microsystems (Java) did a 1:4 split in November 2007. Their $5 share went to $20 after the split. Many institutional investors follow strict guidelines as to what companies to invest in. For example, they wouldn’t touch companies whose shares are trading below certain price levels. This is one reason why Sun did a 1:4 reverse split – try and attract institutional investors. It didn’t happen. Even after the $20 price-tag, Sun’s share prices fell below $3. The only saving grace for Sun investors was the buy-out offer from Oracle. AIG also split it’s stock for the same reason.

Sometimes companies also split so that they can maintain price levels to keep trading in certain exchanges like NYSE. Others do it because they want to prevent artificial manipulation of their low-priced stocks. This is evident from the way stocks like Citigroup, AIG and several other fragile companies are manipulated and traded. However, in the end it doesn’t matter much! If the company’s fundamentals are shaky, the shorts will come and steam-roll it. In fact, reverse splits for certain battered companies is an open invitation to shorts.

Other stocks which split recently are the triple-leveraged finance ETFs (FAS and FAZ). FAS which is a 3x bullish financial ETF did a 1:5 split and it’s bearish counterpart, FAZ did a 1:10 reverse split. Before the split, the trading volume on the stocks was extremely high because of the low share prices – 300 M shares traded per day. The split was aimed at decreasing the volume and avoid heavy price manipulation. This is a strong indication that leveraged ETFs are dangerous plays and not meant for all investors. They never ever give the theoretical 3x performance and are not meant to be long term trading vehicles.

~ Mauneel